Oil drilling, Renewable Energies, Interview With Matteo Di Castelnuovo Director of MaGER

There is nothing stronger than an idea whose time has finally come! Nowadays, renewable energy is becoming more than just an emerging issue and has attracted our attention. Green Light for Business had the great opportunity to meet Matteo Di Castelnuovo, director of MaGER, the only master in Bocconi university focused on energy and environment.

Bocconi University has been dealing with these themes since 15 years on a  postgraduate level but it was only 4 years ago that the university decided to introduce this international program, which incorporates many themes, from energy and environment to CSR.

MaGER benefits from a rather strong position amongst the university rankings around the world, since it is ranked first in its area of subjects (ahead of main competitors such as Stanford and Yale).

Currently they have 34 students of which 22 are international (66%) from all over the world; this proves the global awareness regarding these topics.

Green Light for Business: How did you develop an interest in these topics during a time when awareness regarding these issues was not popular? 

MDC: In 1998, while I was still at Bocconi University, I was working in a Bank and we were discussing the liberalization of energy markets, and I was asked to work on it. So I started focusing on energy, which was not such an attractive sector back then since the only players were Enel and Eni and there also was not much to add. But then with the beginning of liberalization something started to change. I then moved to England to work on the energy markets, first as consultant, before going back to university. In general I can say that my interest around energy was born more accidentally, a passion that I then developed exploring more sustainable ways of producing energy. This latter topic of renewable energies saw an incredible increase from 2008 on, driven by policy and legislative regulation. At that time we thought that more than 20% of renewable energy was not sustainable, both from an economic and technical point of view. Last year Denmark produced 44% only with wind energy, Costa Rica more or less 100%; this is an incredible result and very unexpected. Some companies failed to face this challenge and trend – like Sorgenia – while some others did great like Enel. Finally, the whole energy sector was re-shaped by this.

GL4B: Moving on to a current debate, what is your position on the Italian referendum (on the 17th of April) about oil drilling?

MDC: Europe, compared to USA and China, has for many years ignored the theme of security of supply and this led to a series of problems: the dependency from a certain kind of suppliers and fuels, dependency that is reflected also at a political level. Regardless, Europe started a slow conversion towards gas, but still without abandoning the oil consumption.
Facing this situation, we have to understand what we would like to do with our energy mix, if we want to focus on gas we should maximise our resources on hydrocarbon and exploit them. I don’t see oil as a resource that is currently convenient to exploit and there is plenty of it in the actual market.

We should focus on gas and the construction of infrastructures for the import and distribution of it, also considering that now gas comes also from US, a country with which Europe has very good commercial relationships.

So I would say YES at the referendum, also because these are solid long-term investments, highly intense and risky, especially upstream (exploration and exploitation).

GL4B: You said that it is not a good idea for Italy and Europe to invest in oil these days. What about investing in renewable energies? How is it possible to make those huge investments more sustainable?

MDC: Private consumers and firms care about cost, but the State should care about social welfare and therefore it should sustain investment in renewable energies. The State’s support can be in the form of subsidies, investments in R&D, tax breaks and other kind of fiscal facilitations. Today energy is subsidized around the world, and the majority of these subsidies support traditional energy. Today it is important to increase the percentage of the subsidies supporting renewable energies. A form of help from the government is necessary, because huge initial investments are needed in order to produce solar and wind power; in fact, these technologies have a very high fixed cost, and almost irrelevant variable cost.

GL4B: How do you tackle the uncertainty of investing in one technology instead of another? What if it becomes old and inefficient?

MDC: This is not a real risk today, because we have identified which are the best technologies to implement in the next future: solar energy and wind energy.  Still there are some problems related to these technologies. For instance the noise of the wind turbine. Some kind of compensation is usually offered to the local inhabitants, so that they might cope with this issue. There are also opportunities related to these technologies. For example one trend today is to off-shore wind power, which is also more and more interesting for the companies.

Solar and wind energy are just the most important between renewable energies nowadays, but there are also new interesting possibilities like wave and tidal power.

GL4B: A disruptive innovation is apparently coming from the investments in energy storage technologies. How will this revolution change the sector?

MDC: There are 2 laws that have ruled the energy sector until now:

1) Because we are not able to storage energy, demand and supply need to be constantly balanced;

2) Part of the energy is dispersed while transported.

We cannot intervene in the second one, but innovation in storage will completely transform the energy market from different points of view. First of all new players will have access to the game: companies like Tesla, Samsung, LG or FIAM will develop new technologies and will become market operators. Then the need of balance between Demand and Supply will be lost, so most actors will change their behaviours: for example, customers will decide which energy to use (the one delivered from big companies or their personal storage); arbitrage on price will be possible though, and demand will not be inelastic anymore.

Now, sizeable energy plants are structured in order to cover the seasonal peaks of energy demand. This new approach will instead have the plants accumulate energy and as a consequence lower structural costs and investments.

Moreover, the link between energy and mobility is becoming stronger due to a mutual interest in the storage issue. In fact, is difficult to understand which sector is pulling more of the investments.

We do have confidence that the future of the energy sector will revolve around energy storage, however right now it is a matter of forecasting when, who, how and most importantly which specific technology will be the dominant design (lithium, flow batteries and so on).

GL4B: One of the most common issues nowadays is sustainability, do you think it’s just a matter of “green washing” or do companies believe this is the way forward?

MDC: Today the choices related to sustainability are strategic choices: a company has to consider issues and their impact also from an economic point of view.  From one side there is the pressure from consumers asking for sustainable productions. Consumers do not accept anymore to hear about companies working in developing countries that are not respecting human rights. On the other side the use of renewable also has a positive economic impact; in recent years, big companies like Google and Facebook decided to use renewable energies. One big advantage is the low volatility in prices, proving the implementation of renewables to be a strong strategic decision from a financial and economic point of view.

On behalf of Green Light for Business, we would like to express our gratitude to Matteo Di Castelnuovo for his usual availability and kindness.

Anna Maggioni, Alessandra Franchino and Eleonora Faini